General Assembly Enacts Tax Legislation

01.11.2007

The Kentucky 2007 General Assembly recently convened and several pieces of tax legislation affecting various types of taxes imposed by the Commonwealth and its political subdivisions have been proposed. A summary of the more significant tax bills is provided below.

H.B. 113 would create a new section of KRS Chapter 141 to provide a nonrefundable credit for new 2007 or later years model hybrid dual fuel electric vehicles purchased after December 31, 2006 and provide that the credit is effective for tax years beginning after December 31, 2006. The bill would also amend KRS 141.0205 to establish the order in which the credit may be taken.

H.B. 193 would create various new sections of KRS Chapter 141 to establish a nonrefundable family education tax credit program for corporations and pass-through entities that contribute to scholarship organizations and individuals who directly pay for tuition and other educational expenses. It would also amend KRS 141.010 to exempt amounts received as scholarship grants from "adjusted gross income" and amend KRS 141.0205 to establish the order in which the nonrefundable family education tax credit is applied against tax imposed by KRS 141.020 and 141.040. The credit would apply beginning with the 2007 tax year.

No less than three (3) bills would repeal the limited liability entity tax. H.B. 87 would amend KRS 141.0401 to limit the limited liability entity tax to years beginning before January 1, 2008 and create a new section of KRS Chapter 141 to replace the minimum tax with a minimum fee. Likewise, both H.B. 88 and H.B. 119 would amend KRS 141.0401 and create a new section of KRS Chapter 141 to repeal the limited liability entity tax and leave in place the $175 minimum tax, for tax years beginning on or after January 1, 2008.

H.B. 60 would create a new section of KRS Chapter 139 to exempt the sale or purchase of clothing with a sales price of less than one hundred fifty dollars ($150) per item, school supplies, and computers and computer supplies with a sales price of less than one thousand five hundred dollars ($1,500) per item and amend KRS 139.210, 139.220 and 139.340 to allow retailers to absorb the tax on other items sold during the sales tax holiday and advertise accordingly. If passed, this bill would become effective May 1, 2007.

And finally, H.B. 47 would create a new section of KRS Chapter 48 to establish the tax-me-more account within the state general fund to receive voluntary contributions from individuals and entities that believe they are undertaxed. The bill would require the Finance and Administration Cabinet to promulgate administrative regulations to establish a contribution process and require the Department of Revenue to provide an opportunity for taxpayers to make contributions with their income tax payments. The bill provides that the contributions would not be tax deductible and the amounts in the fund may be appropriated by the General Assembly as part of the biennial budget process.